1. Field of the Invention
This invention generally relates to on-demand business processes, and more specifically, to an option framework for managing on-demand service offerings.
2. Background Art
In an increasingly volatile business environment characterized by intense global competition, short product life cycles, increased technological innovation and complexity, and time sensitive customer demand, the focus of competition in global markets is increasingly shifting from cost, quality and service to speed, flexibility and innovation.
Customers want flexibility in technology investment decisions. This need for flexibility is a logical reaction to risks resulting from demand uncertainty, technology evolution and market fluctuation. These factors of risks can significantly influence the decision-making processes of both the customers and the providers.
E-business “On-Demand” that is promoted recently by several providers in the Information Technology (IT) industry is a new way of deploying IT infrastructure and offering IT services. It was developed in response to the need to hedge the aforementioned risks and react to fluctuating market conditions in real time. Customer's may pay for and consume resources on an as needed basis. This provides customer flexibility, a mechanism for risk sharing and a means to enhance information flows.
However, “On-Demand” offerings introduce uncertainties of its own for both the service provider and customer. The following are a subset of those management concerns: What are the impacts of “On-Demand” to both the suppliers and buyers' investment and purchase behaviors for IT/Technology/E-business? What are the implications of “On-Demand” offerings to suppliers and buyers' revenue, cost, and/or profit? What is the value of on-demand to a specific buyer? When should a buyer use the traditional buy-and-operate mode and when should he invoke “On-Demand”? Where (i.e., in which markets/industries/sectors) should a supplier target “On-Demand” offerings? How should a supplier price the “On-Demand” (with respect to the traditional buy-and-operate model)? How should a supplier design, provision, and manage the “On-Demand” products and services?
The existing management techniques and practices for “On-Demand” do not answer these questions adequately. They do not handle demand risk, technology risks and market risks.